Total housing inventory fell 3.0% at the end of February to 4.03 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.2-month supply in January. Most housing experts look at inventory in assessing the overall health of the housing market, particularly in times of market stress.

According to Brian Wesbury and Bob Stein at First Trust Portfolios, "The best news in today’s report is that the inventory of existing homes is declining."

Comment: After rising for nine consecutive months in 2007, the important variable "months supply of houses at the current sales rate" has declined in three out of the last four months (see chart above), suggesting an improvement in the balance between homes available for sale and buyers in the market for homes.

More lipstick on Bear Stearns' pigCommentary: Fed has gone into partnership with J.P. Morgan

The Bush administration has been downplaying its role in the bailout by stressing that the funds come from the Fed. But Ely said there is no functional difference: It is being made on behalf of the U.S. government. "Whether it is the Fed or the Treasury, it is the right hand or the left hand," Ely said. Treasury may be constrained by statute from making the loan, Ely said, but there are also political advantages because President Bush has pledged that there will be no government bailouts in the financial and housing market turmoil. "I think Treasury would prefer that it be done through the Fed so it had the look of a little more political independence and hands-offness," Ely said. White House spokesman Dan Perino again skirted the issue when asked about the new agreement at Monday's briefing. "This is a deal between Bear Stearns and J.P. Morgan; the Fed is involved...and part of the Fed's commitment to the country, and their mission, is to make sure that the taxpayers are protected, and that is particularly true in this regard, as well," Perino said. But members of Congress see right through this façade, Ely said. "They will be all over this thing. There are lots of grandstanding opportunities."